A slow spring thaw didn't stop home buyers.
Home sales in Minnesota and across the country posted modest gains last month, while prices increased by double digits, according to a pair of reports released Wednesday.
April home sales in Minnesota eked out a 0.3 percent increase compared with last year with the median price rising 12 percent to $165,000, according to the Minnesota Association of Realtors. Declines in foreclosures and short sales, and growing competition for a dwindling number of listings is boosting prices in the state.
Across the U.S., sales were up 9.7 percent compared with last year to a seasonally adjusted annual rate of 4.97 million — the highest since November 2009, according to the National Association of Realtors. The median price rose 11 percent from last year, reaching its highest level since 2008.
"The robust housing market recovery is occurring in spite of tight access to credit and limited inventory," said Lawrence Yun, NAR's chief economist. "Without these frictions, existing-home sales easily would be well above the 5-million-unit pace."
Economists polled by MarketWatch had expected the pace of existing-home sales to hit a rate of 5 million in April, compared with a prior estimate of a 4.92 million rate in March, but there's growing concern that a shortage of listings is holding back the recovery even though market fundamentals are solid.
Mortgage rates have been near record lows for several months running, and a shortage of listings is causing an outbreak of bidding wars in some of the most popular neighborhoods.
"Both first-time buyer and investor buying trends have remained steady over the past six months, suggesting that the recent rebound in home prices has not yet become an issue for buyers," according to a research note from Gennadiy Goldberg, U.S. strategist with TD Securities.
Sales, however, have been roughly flat since November because the supply of available homes remains tight and many potential buyers aren't able to get loans.
In Minnesota, new listings rose only 0.8 percent, causing the total inventory to drop nearly 14 percent.
Higher prices are expected to motivate sellers and unleash new listings in the coming months as homeowners regain confidence in their ability to sell.
"We hope to see an increase in the listing inventory as the summer months approach," said Jim Cormier, president of the Minnesota Association of Realtors.
For now, there are still an overwhelming number of homeowners across the country who would like to sell, but can't because they're underwater on their mortgage. New data from Zillow shows that in the Twin Cities metro, negative equity during the first three months of the year fell slightly from the previous quarter, but remained at a staggering 30 percent of homeowners with a mortgage. That's nearly 210,000 homes with a combined $13.2 billion in negative equity.
Pent-up demand is supporting sales, but tight credit standards and inventories are holding back gains. There are also head winds remaining from high unemployment, though the economy is adding jobs.
"Unless the regular turnover increases more aggressively," wrote Yelena Shulyatyeva, an economist at BNP Paribas, "existing home sales growth could flatten out somewhat this year."
MarketWatch contributed to this report.